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Apple's share price was leading the stock market's rally
earlier this year, and lately it has been leading the
correction. This fall from grace for the stock of
Apple has
a lot of analysts puzzled, because Apple the company still
appears to be doing great. It has huge sales on smart
phones and tablets, which are things that barely existed just a
few years ago, and which thanks to Apple are now becoming
ubiquitous.

But regardless of what any person says about the company's
prospects, the message from the share price is that something
is wrong. We don't have to know what that something is in
order to receive that message, and often the revelation of what
the trouble really is comes months after the trouble shows up
in the share price.

Of greater interest to me than Apple's performance over the
past 2 months is the shape of its price plot over the past few
years. It strongly resembles the share price pattern of
one of the tech darlings from a few decades ago, namely the
Radio Corporation of America (RCA). Radio was the hot new
technology of the 1920s, after the US government released
restrictions on its use following World War I. In a very
short amount of time, radio stations sprang up around the
country, and most homes owned a radio to listen to programs
like Rudy Vallée, Your Hit Parade, and Amos 'n' Andy. RCA
was born out of General Electric, as opposed to being born in a
garage in California like Apple, but its rise was just as
meteoric as Apple's has been lately. And that's where the
worry comes.

This week's chart is one which appeared in the Sep. 26, 2012
issue of our twice monthly McClellan Market Report
newsletter. That was when Apple's share price was just
making its top above $700, and analysts were arguing about how
long it would take to get to $1000. People are not
arguing about that as much now.

To create this week's chart, I used (with permission) a chart
created by Dr. Bryan Taylor, of Global
Financial Data. For those who may be unfamiliar with
that firm, they have one of the most extensive historical
databases of financial and market price data, in some cases
going back several centuries. If you have a need for some
historical data that you cannot seem to find elsewhere, it is a
good bet that Global Financial Data can help you out.

Overlaid on Global's chart of RCA's share price from the 1920s
and 1930s is a plot of Apple's share price from the current
period. The time scales are equivalent in each of the
charts. It took a little bit of graphical magic to get
two images to appear together this way, and with the proper
X-axis scaling so that time was not stretched or compressed.
But such work can be worth the effort when it yields an
insight that is as interesting as this one is.

The pattern correlation on the way up is pretty obvious, and
pretty compelling. And it leads us to the conclusion that
if the correlation continues into the future, then Apple's
share price could get into real trouble next year.

That big decline in RCA's share price did not happen in a
vacuum. It was part of the overall decline in the stock
market following the Oct. 29, 1929 crash. So that is one
big reason to argue against seeing the exact same sort of
behavior in Apple's share price in 2013, unless one believes
that we are actually headed for a 1930-style market meltdown
during 2013. Based on other research that we do, I cannot
discount the possibility of such a decline in 2013, especially
after May 2013. Subscribers to our newsletter and Daily
Edition, who have seen my eurodollar Commitment of Traders
leading indication, know why May 2013 is such an important time
point for the stock market.

We'll know better in a few weeks whether this price pattern
analog for Apple is on the right track, or if it was just an
interesting anomaly that won't work going forward. If we
see Apple's share price build a big right-shoulder structure
over the next couple of months and then roll over, it will be
time to conclude that it is continuing to dance the same dance
that RCA displayed 8 decades ago.

For what it's worth, the collapse of RCA's share price in 1930
from its big bubble top was far from the end of the story for
that company. It continued producing radio equipment for
many years thereafter, and was a leader in the development of
television technology, including color TV. So if Apple
really is the next RCA in more ways than just matching the
shape of its 1920s price advance, then a potential selloff in
2013 should not necessarily mean a complete fall from grace for
the company.